Annals of Workers Comp: "Sort of" Employees
New York Governor Andrew Cuomo recently announced an initiative to expand Uber and Lyft ride-hailing services to the Buffalo area. (We will not comment on the $750,000 in lobbying by Uber and Lyft that perhaps helped focus his attention on the need for services in this area.) While his announcement lacked much in the way of detail, there was one interesting highlight that caught our attention: the "independent contractor" drivers of the two companies would be required to carry workers comp insurance. An intriguing idea, but how would it work?
To begin with, New York will have to finesse the issue of independence: independent contractors are exempt from comp and excluded from other benefits. Under the proposed plan, drivers would become employees of the Black Car Fund, a non-profit carrier that insures limousine drivers. But they would be employees in a very limited sense, solely for the purpose of workers comp coverage; the drivers would have no access to other key employment benefits such as minimum wage, social security, unemployment insurance, sick and vacation leave. They would function in a kind of employment limbo, hybrid workers, "sort of" employees, with a solitary fringe benefit.
Once you have established that Uber and Lyft drivers must be covered by workers comp, you have to figure out how to determine premium and who will pay for it. Under normal circumstances, workers comp, premiums are paid by the employer, with costs derived from a complex formula involving class codes, payrolls and loss experience. In this case, the governor is proposing something else altogether: a 2.5% surcharge on every ride, to be paid by customers of the service. Where conventional employers pay upwards of 30 percent on fringe benefits for their employees, Uber and Lyft would pay nothing and the benefits would be very narrowly defined.
The New Workplace
Uber and Lyft present themselves as mere software platforms, with virtually all their services provided by independent contractors. New York has proposed a small step to make these drivers employees, albeit of a third party and with relatively little in the way of benefits. While I doubt that Uber and Lyft executives will have any problem with this approach, the drivers themselves may well wonder how so many of the benefits of being an employee have suddenly disappeared.
Senior Workers Compensation Consultant